Asia Maritime

South China Sea concerns flare up as Duterte weighs drilling in Beijing's claims

July 14, 2017

“Manila is largely hoping for the best, and plans could be highly vulnerable to a direct rebuke from China,” she wrote in a Thursday note. “Having watched Vietnam develop disputed offshore areas, with the absence of physical intervention from China, Manila is also testing the boundaries.”

Alternatively, Manila may have sought direct approval from China and traded a softer stance in the South China Sea for exploration rights, she continued.

Regardless, the murky political situation could impact corporate demand for energy drilling if December’s bidding round does materialize.

Upstream oil and gas company PXP Energy was one of the companies whose Reed Bank operations were disrupted in 2014, but while it “may be eager to continue with exploration, other companies will be wary of China’s position on drilling in disputed waters,” Taylor said.

The decision to restart drilling also highlights Manila’s energy security concerns, especially as the country’s Malampaya natural gas field, also located in the South China Sea, winds down, Taylor noted.